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Pre-Feasibility Study

Fast Food Restaurant

Pre-Feasibility Study Prime Ministers Small Business Loan Scheme


(Fast Food Restaurant)

Small and Medium Enterprises Development Authority Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road, Lahore Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7 helpdesk@smeda.org.pk REGIONAL OFFICE PUNJAB 3rd Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road Lahore, Tel: (042) 111-111-456 Fax: (042) 36304926-7 helpdesk.punjab@smeda.org.pk REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE KPK Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

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Fast Food Restaurant

Table of Contents 1. DISCLAIMER.....................................................................................................1 2. PURPOSE OF THE DOCUMENT......................................................................2 3. INTRODUCTION TO SMEDA............................................................................2 4. INTRODUCTION TO SCHEME .........................................................................3 5. EXECUTIVE SUMMARY ...................................................................................3 6. BRIEF DESCRIPTION OF PROJECT AND PRODUCT ...................................4 7. CRITICAL FACTORS ........................................................................................5 8. INSTALLED AND OPERATIONAL CAPACITIES ............................................5 9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ........................................5 10. POTENTIAL TARGET MARKETS / CITIES .................................................6 11. PRODUCTION PROCESS FLOW ................................................................7 12. PROJECT COST SUMMARY .......................................................................8 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 PROJECT ECONOMICS ............................................................................... 8 PROJECT FINANCING ................................................................................. 8 PROJECT COST......................................................................................... 9 SPACE REQUIREMENT ............................................................................... 9 MACHINERY AND EQUIPMENT ................................................................... 10 FURNITURE AND FIXTURES ....................................................................... 11 RAW MATERIAL REQUIREMENTS ............................................................... 11 HUMAN RESOURCE REQUIREMENT ........................................................... 12 REVENUE GENERATION ........................................................................... 12 OTHER COSTS ........................................................................................ 13

13. CONTACTS - SUPPLIERS, EXPERTS/CONSULTANTS ..........................15 14. ANNEXURE ................................................................................................16 14.1 14.2 14.3 14.4 14.5 ANNEXURE 1 - INCOME STATEMENT .......................................................... 16 ANNEXURE 2 STATEMENT OF CASH FLOW .............................................. 17 ANNEXURE 3 BALANCE SHEET .............................................................. 18 USEFUL PROJECT MANAGEMENT TIPS ...................................................... 19 USEFUL LINKS ........................................................................................ 20

15. KEY ASSUMPTIONS .................................................................................22

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Fast Food Restaurant

1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and information on the said matter. Although, the material included in this document is based on data/information gathered from various reliable sources; however, it is based upon certain assumptions which may differ from case to case. The information has been provided on as is where is basis without any warranties or assertions as to the correctness or soundness thereof. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA, its employees or agents do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The contained information does not preclude any further professional advice. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information which is necessary for making an informed decision including taking professional advice from a qualified consultant/technical expert before taking any decision to act upon the information. For more information on services offered by SMEDA, please contact our website: www.smeda.org.pk

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2. PURPOSE OF THE DOCUMENT


The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, marketing, finance and business management. The purpose of this document is to facilitate potential investors in fast food restaurant business by providing them with a general understanding of the business with the intention of supporting potential investors in crucial investment decisions. The need to come up with pre-feasibility reports for undocumented or minimally documented sectors attains greater imminence as the research that precedes such reports reveal certain thumb rules; best practices developed by existing enterprises by trial and error, and certain industrial norms that become a guiding source regarding various aspects of business set-up and its successful management. Apart from carefully studying the whole document one must consider critical aspects provided later on, which form basis of any Investment Decision.

3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in October 1998 with an objective to provide fresh impetus to the economy through development of Small and Medium Enterprises (SMEs). With a mission "to assist in employment generation and value addition to the national income, through development of the SME sector, by helping increase the number, scale and competitiveness of SMEs", SMEDA has carried out sectoral research to identify policy, access to finance, business development services, strategic initiatives and institutional collaboration and networking initiatives. Preparation and dissemination of prefeasibility studies in key areas of investment has been a successful hallmark of SME facilitation by SMEDA. Concurrent to the prefeasibility studies, a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of experts and consultants and delivery of need based capacity building programs of different types in addition to business guidance through help desk services.
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4. INTRODUCTION TO SCHEME
Prime Ministers Small Business Loans Scheme, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidised financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Small business loans with tenure up to 7 years, and a debt: equity of 90 : 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).

5. EXECUTIVE SUMMARY
The fast food restaurant is proposed to be established at a location that has a continuous stream of traffic, convenient parking, and is in proximity to other businesses, preferably near densely populated middle income areas or flat complexes. Major cities like Karachi, Hyderabad, Sukkur, Larkana, Multan, Lahore, Gujranwala, Faisalabad, Sialkot, Gujrat, Rawalpindi, Peshawar, Hub and Quetta etc. are suitable to house the project. Common menu items at the proposed fast food outlet include sandwiches, burgers, fried chicken, Chinese soups and Chinese rice variants, French fries, salad and cold drinks. The fast food would have an installed capacity to serve 335 clients per day; however the restaurant would initially start business with 140-150 clients. 10 personnel would be required to manage the operations of fast food restaurant. Total Cost Estimates are Rs. 2,216,365/- with a fixed investment of Rs. 1,894,750/- and an initial working capital requirement of Rs. 321,615/-. Given the cost assumptions Internal rate of Return (IRR) and payback are 53% and 2.25 years respectively. The most critical considerations or factors for success of the project are: 1. Choosing the right location for the fast food outlet 2. Creating the right menu and menu pricing 3. Hiring experienced cooks and staff 4. Knowing the competition

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6. BRIEF DESCRIPTION OF PROJECT AND PRODUCT


Fast food is a name given to food which is prepared with preheated or precooked ingredients and served to customers in a packaged form for take-away quickly at outlets called fast-food restaurants. Many fast-food restaurants are part of restaurant chains or franchise operations, and standardized foodstuffs are shipped to each restaurant from central locations. There are also simpler fastfood outlets, such as stands or kiosks, which may or may not provide shelter or chairs for customers. As the capital requirements to start a fast-food restaurant are relatively small, individually-owned fast-food restaurants have become popular and common throughout Pakistan. Market growth largely depends on population growth and demographics, urbanization and changing lifestyle patterns and demand for convenience, which signals a good potential for this type of business. Technology: The proposed setup with used fast food cooking machinery including fryers, grilling machine, soup containers and pre-processing equipment would serve popular fast food and Chinese cuisine. Location: The business is envisaged to be established as a fast food takeaway or satellite outlet with very limited seating capacity on rented premises or shop of around 500 sqft. near a densely populated area suitable for fast foods. Major cities like Karachi, Hyderabad, Sukkur, Larkana, Multan, Lahore, Gujranwala, Faisalabad, Sialkot, Gujrat, Rawalpindi, Peshawar, Hub and Quetta etc. are suitable to house the project. Product: Four popular fast food items, including fried chicken, burgers, sandwiches and Chinese fried rice and soups, have been selected to be served separately or as combo meals through the outlet. The restaurant is proposed to have an installed capacity of serving 335 clients per day but is estimated to start with 140-150 clients per day. Target Market: The middle income segment of major cities of the country like Karachi, Hyderabad, Sukkur, Larkana, Multan, Lahore, Gujranwala, Faisalabad, Sialkot, Gujrat, Rawalpindi, Peshawar, Hub and Quetta etc. is the target market for the project under consideration. Employment Generation: The proposed project will provide direct employment to 10 people. Financial analysis shows the setup shall be profitable from the very first year of operation.

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7. CRITICAL FACTORS
Whether an entrepreneur is opening a one-of-a-kind fast food no-frills restaurant or trying to expand an existing fast food outlet into a multi-unit chain, there are winning principles that can improve the chances of success. Some key success factors are as follows: Selecting the right location and layout Hiring employees especially cooks and servers Quality & Hygiene Creating the right menu Menu pricing Operational consistency Knowing the competition

8. INSTALLED AND OPERATIONAL CAPACITIES


In the fast food restaurant business the installed capacities are mainly dependant on the location and layout of the outlet, the service style and food concept and the target market. The proposed fast food business setup is envisaged to be established as a take-away outlet with very limited seating capacity around it. The restaurant is expected to serve around 335 customers in a day. At start up the operational capacities are estimated to be around 140-150 clients. Once the fast food gains popularity and acceptance sales are expected to increase annually with the same installed capacity.

9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT


In recent years, much of the expansion in the fast food business has been in the form of "satellite" outlets. These tend to be smaller in size, with little or no seating capacity, and are often in nontraditional locations, such as office buildings, department stores, airports, and gasoline stations; locations chosen specifically to maximize convenience and consumer accessibility. It is important to find a location that has a continuous stream of traffic, convenient parking, and is in proximity to other businesses or densely populated middle income areas/flat complexes where the target market is available. Here are some factors to consider when deciding on a location to establish a fast food outlet:

Anticipated sales volume. Estimate the sales potential of a location.


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Accessibility and visibility. Consider how easy it will be for customers to get to the fast food. If an entrepreneur is relying on strong pedestrian traffic, it should be considered whether or not nearby businesses will generate foot traffic. The rent-paying capacity of the business. Sales-and-profit projections give a fair idea of how much revenue can be generated, and that information can be used to decide how much rent can be paid. Restrictive ordinances. Unusually restrictive ordinances can be encountered that make an otherwise strong site less than ideal. Traffic density. Two factors are especially important in this analysis: total pedestrian traffic during business hours and the percentage of it that is likely to patronize the food service business. Customer parking facilities. The site should provide convenient and adequate parking and easy access for customers. Proximity to other businesses. Neighboring businesses may influence the fast foods sales volume, and their presence can have both positive and negative implications. History of the site. The recent history of each site under consideration should be ascertained before making a final selection. Terms of the lease. All the details of the lease must be carefully read, as it is possible to encounter unacceptable lease terms for an otherwise excellent site. Future development. The local Development Authority / Planning Board should be consulted to check if any development is planned for the future that could affect the business, such as bridges, underpasses or any construction restricting accessibility.

Major cities like Karachi, Hyderabad, Sukkur, Larkana, Multan, Lahore, Gujranwala, Faisalabad, Sialkot, Gujrat, Rawalpindi, Peshawar, Hub and Quetta etc. are suitable to house the project.

10. POTENTIAL TARGET MARKETS / CUTOMERS


The fast food restaurant market is a growing segment in Pakistan relying heavily on the changing lifestyle patterns, population growth of the target age group and the related increase in employment of women. The fast food consumption has also augmented due to increase in the employment rate for males / female population aging between 20 to 29 years (fast food goers). In today's hectic urban lifestyles, demand for convenience is dominating all other preferences.
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People want quick and convenient meals; they do not want to spend a lot of time preparing meals, traveling to pick up meals, or waiting for meals in restaurants. As a result, consumers rely on fast food. However the major chunk of fast-food goers, the middle income segment, prefers visiting outlets that offer fast food at affordable prices. Fast Food outlets tend to focus on the work while you eat or shop while you eat philosophy and fast food restaurants are rapidly becoming the eatery "everyone can agree on", with many featuring menu combos for children, play areas and fancy branding campaigns, designed to appeal to younger customers. The proposed fast food restaurant/outlet can be established in all major cities of the country like Karachi, Hyderabad, Sukkur, Larkana, Multan, Lahore, Gujranwala, Faisalabad, Sialkot, Gujrat, Rawalpindi, Peshawar, Hub and Quetta etc., where there is traffic of the aforementioned market segment.

11. PRODUCTION PROCESS FLOW


The service delivery diagram of the proposed fast food restaurant is as follows.

Service Flow Process

Drive through customer

Place order
Front desk Server Order in queue

Meal preparation Main course (Grill/Fry meat Fry rice & curry Prepare/heat soup Assembling order Sideline preparation

Takeaway

Walk in customer

Dine-in

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12. PROJECT COST SUMMARY


A detailed financial model has been developed to analyze the commercial viability of this project under the Prime Ministers Small Business Loan Scheme. Various cost and revenue related assumptions along with results of the analysis are outlined in this section. The projected Income Statement, Cash Flow Statement and Balance Sheet are attached as annexures. 12.1 Project Economics The following table shows internal rates of return and payback period for fastfood restaurant starting operations with 140-150 clients. Table 1 - Project Economics Description Internal Rate of Return (IRR) Payback Period (yrs) Net Present Value (NPV) Details 53% 2 .25 years Rs 6,967,202

Returns on the project and its profitability are highly dependent on the location, quality of food and service, efficiency of the service team, interest of the owner manager and competition. 12.2 Project Financing Following table provides details of the equity required and variables related to bank loan; Table 2 - Project Financing
Description Total Equity (10%) Bank Loan (90%) Markup to the Borrower (%age/annum) Tenure of the Loan (Years) Details Rs. 221,637 Rs. 1,994,728 08% 07

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12.3 Project Cost Following requirements have been identified for operations of the proposed business. Table 3: Capital Investment for the Project Capital Investment Renovation Cost Furniture & fixtures Machinery & Equipment Advance Rent and Gas Security Deposit (GSD) Preliminary Expenses Total Capital Costs Initial Working Capital Total Project Cost 12.4 Space Requirement The land requirement is around 500 sqft. It is recommended that the fast food outlet be opened on the ground floor of flat complexes or shopping mall or any other area with high retail consumer traffic. As per the proposed service style, the floor space needs to be carefully allocated to allow for maximum space for food preparation and store. The allocation of space between different sections would be as follows: Amount (Rs.) 235,000 181,250 948,500 505,000 25,000 1,894,750 321,615 2,216,365

Table 4: Space Requirement


Space Requirement (in ft.) Area (Sqft.) 350 100 25 25 500 Cost of Renovation Amount (Rs.) 175,000 30,000 22,500 7,500 235,000

Kitchen and preparation Store Front desk and waiting area Waiting area Total Area

The proposed premises would be acquired on a rental basis with 3 month deposit and 3 months advance rent after which rent will be payable every month. The monthly rent is estimated at approximately Rs. 85/ Sq. feet amounting to Rs. 42,500 for the proposed fast food outlet (500 Sq Ft.). The premises renovation

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costs of Rs. 235,000/- would be depreciated at the rate of 10% per annum using diminishing balance method. 12.5 Machinery and Equipment Fast-food machines are easily available in the market where and entrepreneur has the choice to select from international brands such as Spinzer, Frymaster, Henny Penny, Lincoln, Ayrking, Keating, Mirror, Carpigiani, Lincat, Morretti, Ilsa, Round-Up, Sanyo, Elettrobar etc. Chinese brands have gained popularity over the years. The machines can be ordered through international vendors with a minimum delivery period of 3 months while refurbished / reconditioned machines are also available. There is also an option to procure used machines from closing outlets but the durability and reliability factor must be taken into consideration while buying such machines. The typical fast food restaurant as outlined above would require the following machine / equipment for its operations: Table 5: List of Machinery and Equipment Description Freezers (12 cf.) Broast Machine (15 Pound Capacity)* Deep Well Fryer (Single Valve With 2 Baskets) Hot Plate for Burgers, Kebab, Sandwiches (30"x22") Bin Marry Soup Container (2 Valve With Steel Cabinet) Potato Cutter (8mm) Peeler (4.5 Kg Potato Peeling Capacity) Microwave Generator 1.5 kva Keg rack and others Total Quantity 2 1 1 1 1 1 1 1 1 2 Cost Rs/unit 40,000 630,000 40,000 33,000 50,000 3,500 7,000 10,000 75,000 10,000 Total Rs. 80,000 630,000 40,000 33,000 50,000 3,500 7,000 10,000 75,000 20,000 948,500

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12.6 Furniture and Fixtures The project is envisaged to operate as a take-away fast food; however a limited seating arrangement without shelter around the outlet, similar to existing local fast foods, would be provided to entertain a maximum of 40 customers. The following table gives the details of the furniture and fixtures requirement for the front and back-house operations. Table 6: Furniture and Fixtures Costs
Description Dining Table Square Chairs (Standard 14) Kitchen Cutlery Set Dining Cutlery* (Plate, Fork, Knife, Spoon, Glass) Hot Water Geyser Large Lights / CFLs Wall Lights (Large)/ Tube lights Portable Emergency Light Working tables/counter Counter Chairs Office Counter & Chair Set Waiting Chairs for Take Away Customers Total Quantity 10 40 2 60 1 15 6 4 1 2 1 4 Cost (Rs.) Amount (Rs.) 3,500 35,000 1,500 60,000 2,500 5,000 150 20,000 250 750 2,500 15,000 1,500 10,000 1,500 9,000 20,000 3,750 4,500 10,000 15,000 3,000 10,000 6,000 181,250

12.7 Raw Material Requirements It is assumed that material inventory for 5-6 days would be kept at the restaurant. The cost of material required is as under. Table 7: Cost of Raw Material Description Material for fried chicken Material for burgers Material for sandwiches Material for Chinese food Soft drinks and fries etc. Packaging material Total Raw Material Cost
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Cost (Rs.) 20,324 21,165 9,772 19,323 15,397 1,134 87,115

Pre-Feasibility Study

Fast Food Restaurant

The raw material cost is estimated to increase by 12% annually. 12.8 Human Resource Requirement The human resource requirement is as follows: Table 9: Human Resource Requirement Description Owner Manager Kitchen Supervisor Cook Servers Dishwasher Cleaner Total Staff No. of Employees 1 1 3 3 1 1 10 Salary per month (Rs.) 28,000 15,000 12,000 10,000 10,000 10,000 Total monthly salary (Rs.) 28,000 15,000 36,000 30,000 10,000 10,000 129,000

Considering the size of the proposed establishment it is assumed that the owner would be managing the overall affairs of the fast food setup. He will be required to process and check bills, invoices, and cash and also maintain accounts, etc. The owner will also ensure safe custody of all keys. It is essential to hire experienced cooks trained in operating fast food machinery for the project. The proposed project would need a total of 10 persons to handle the fast food operations. Salaries of all employees are estimated to increase at the rate of 10% annually. 12.9 Revenue Generation The Sales are expected to increase by 12% every year. The 12% annual increase in revenue is expected to result from a part increase in customer traffic and part increase in product price. The prices used to calculate the gross revenue earned are based on the billing rate at which the entrepreneur will charge the customer. The item-wise estimated revenue at the fast food restaurant is as follows

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Table 10: Revenue


Sales Price (Rs./Unit) 145 290 550 120 140 100 120 140 120 100 110 140 150 280 150 280 100 160 110 130 150 230 50 25 80 20 First Year Sales (No.) 4,320 2,880 1,440 4,320 3,600 3,600 3,600 4,320 3,600 1,440 720 3,600 1,440 720 1,440 720 720 2,880 1,080 720 720 1,440 1,800 1,440 1,440 2,160 74,880 First Year Sales Revenue (Rs.) 626,400 835,200 792,000 518,400 504,000 360,000 432,000 604,800 432,000 144,000 79,200 504,000 216,000 201,600 216,000 201,600 72,000 460,800 118,800 93,600 108,000 331,200 450,000 72,000 36,000 172,800 1,497,600 10,080,000

Item Description Chicken Broast (Qtr.) Chicken Broast (Half) Chicken Broast (Full) Chicken Burger Chicken Cheese Burger Beef Burger Beef Cheese Burger Zinger Burger Chicken Sandwich Egg Sandwich Beef Sandwich Club Sandwich Hot & Sour Soup (2 Servings) Hot & Sour Soup (4 Servings) Chicken Corn Soup (2 Servings) Chicken Corn Soup (4 Servings) Plain Rice Chicken Fried Rice Vegetable Fried Rice Egg Fried Rice Beef Fried Rice Beef Chili (w/o rice) Chicken Chili (w/o rice) French Fries (per plate) Cole Slaw Soft Drinks (Large) Soft Drinks (Regular 250ml) Total Sales Revenue

Unit No No No No No No No No No No No No No No No No No No No No No No No No No No

12.10 Other Costs Machinery Maintenance: All machines require routine cleaning and maintenance after every three months and an annual service which costs
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around 1% to 5% of the total cost depending upon the use of the machine and operator's skill. The maintenance cost for machinery is assumed at 2.5% of the depreciated cost of machinery and equipment. Rent and deposits: The proposed premises will be acquired on a rental basis with 3 month deposit and 3 months advance rent after which rent will be payable on a monthly basis. The rent is estimated to be Rs. 85/ Sqft/month amounting to Rs. 42,500 per month for the proposed fast food outlet (500 Sq Ft.). A fixed Gas Security amounting to Rs. 250,000/- for gas connection (GSD) would have to be deposited with the local utility agency. Utilities Requirements: The following table presents the estiamted breakup of utilities on a monthly basis:
Description Electricity Gas Water Telephone Total Monthly Charges (Rs.) 35,000 22,000 3,000 3,000 63,000

Working Capital Requirements: It is estimated that an additional amount of approximately Rs. 321,615 will be required as cash in hand to meet the initial working capital requirements / contingency cash. The requirement is based on the rent, utilities and salaries expenses for at least one month and 5-6 days raw material inventory. The following table gives the break up. Description Utilities Salaries Raw Material Rent Total Days 30 30 6 30 Charges (Rs.) 63,000 129,000 87,115 42,500 321,615

Preliminary Expenses: The provision for preliminary expenses is assumed to be Rs. 25,000, which will be amortized equally over a 5 year period. Miscellaneous Expenses: A monthly figure of Rs. 30,000 (1,000 per day) is assumed to be incurred for miscellaneous expenses which are expected to increase at the rate of 10% per annum for the projected period.

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Financial Charges: It is assumed that long-term financing for 7 years will be obtained to finance and establish the fast food setup, including premises/shop renovation, purchase of machinery & equipment, purchase of inventory etc. This loan facility would be acquired at a rate of 08% per annum with 84 monthly installments over a period of seven years. The installments are assumed to be paid at the end of every month. Taxation: The business is assumed to be run as a sole proprietorship; therefore, tax rates applicable on the income of a non salaried individual taxpayer are used for purpose income tax calculation. Cost of Capital: The cost of capital is explained in the following table: Particulars Required return on equity Cost of finance Weighted average cost of capital Rate 20.0 % 08.0 % 09.2 %

The weighted average cost of capital is based on the debt/equity ratio of 90:10.

13. CONTACTS - SUPPLIERS, EXPERTS/CONSULTANTS


There are many local suppliers of fast food machinery working in Karachi and other cities that may be contacted for quotes or procurement. Machinery Supplier Contact Hussain Engineering Office #C-34, Modern Complex, Sector 11-1, North Karachi Karachi Phone: 021-36979850 Fax: 021-36976570

Director General National Institute of Food Science and Technology University of Agriculture, Faisalabad Phone:041-9200161-70/3011

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14. ANNEXURE
14.1 Annexure 1 - Income Statement
FAST FOOD RESTAURANT Year 3 Year 4 Year 5

Projected Income Statement (Rs.)

Year 1

Year 2

Year 6

Year 7

Year 8

Year 9

Year 10

Revenue Net Sales Raw Material Cost Labor & Salaries Utilities Cost of Sales Gross Profit General Administrative & Selling Expenses Rent Expense Office & Miscellaneous Expenses Amortization Expenses Depreciation Expense Maintenance Expense Subtotal Operating Income Financial Charges (08% Per Annum) Earnings Before Taxes Tax Net Profit Monthly Profit After Tax

10,080,000 10,080,000 6,110,640 1,548,000 756,000 8,414,640 1,665,360

11,289,600 11,289,600 6,843,917 1,702,800 831,600 9,378,317 1,911,283

12,644,352 12,644,352 7,665,187 1,873,080 914,760 10,453,027 2,191,325

14,161,674 14,161,674 8,585,009 2,060,388 1,006,236 11,651,633 2,510,041

15,861,075 15,861,075 9,615,210 2,266,427 1,106,860 12,988,497 2,872,578

17,764,404 17,764,404 10,769,036 2,493,069 1,217,546 14,479,651 3,284,754

19,896,133 19,896,133 12,061,320 2,742,376 1,339,300 16,142,996 3,753,136

22,283,669 22,283,669 13,508,678 3,016,614 1,473,230 17,998,522 4,285,146

24,957,709 24,957,709 15,129,720 3,318,275 1,620,553 20,068,548 4,889,161

27,952,634 27,952,634 16,945,286 3,650,103 1,782,608 22,377,997 5,574,636

510,000 360,000 5,000 136,475 21,341 1,032,816 632,544 151,573 480,971 8,097 472,874 39,406

561,000 396,000 5,000 122,828 19,207 1,104,035 807,249 133,188 674,061 27,406 646,655 53,888

617,100 435,600 5,000 110,545 17,286 1,185,531 1,005,794 113,277 892,517 56,378 836,140 69,678

678,810 479,160 5,000 99,490 15,558 1,278,018 1,232,023 91,713 1,140,310 93,547 1,046,764 87,230

746,691 527,076 5,000 89,541 14,002 1,382,310 1,490,268 68,359 1,421,909 135,786 1,286,123 107,177

821,360 579,784 0 80,587 12,602 1,494,333 1,790,421 43,067 1,747,354 196,971 1,550,383 129,199

903,496 637,762 0 72,528 11,342 1,625,128 2,128,008 15,676 2,112,332 269,966 1,842,366 153,530

993,846 701,538 0 65,276 10,207 1,770,867 2,514,279 0 2,514,279 351,070 2,163,209 180,267

1,093,230 771,692 0 58,748 9,187 1,932,857 2,956,304 0 2,956,304 461,576 2,494,728 207,894

1,202,553 848,861 0 52,873 8,268 2,112,556 3,462,081 0 3,462,081 588,020 2,874,061 239,505

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14.2 Annexure 2 Statement of Cash Flow


FAST FOOD RESTAURANT

Projected Statement of Cash Flows (Rs.) Cash Flow From Operating Activities Net Profit Add: Depreciation Expense Amortization Expense (Increase) / Decrease in RM Inventory Net Cash Flow From Operations Cash Flow From Financing Activities Receipt of Long Term Debt Repayment of Long Term Debt Owner's Equity Net Cash Flow From Financing Activities Cash Flow From Investing Activities Construction Cost Office Furniture Equip & M/C Advance Rent Preliminary Expenses Raw Material Inventory Net Cash Flow From Investing Activities NET CASH FLOW

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

472,873.6 136,475.0 5,000.0 (10,454) 603,895

646,654.6 122,827.5 5,000.0 (11,708) 762,774

836,139.7 110,544.8 5,000.0 (13,113) 938,571

1,046,763.5 99,490.3 5,000.0 (14,687) 1,136,567

1,286,122.5 89,541.2 5,000.0 (16,449) 1,364,215

1,550,382.8 80,587.1 (18,423) 1,612,547

1,842,365.5 72,528.4 (20,634) 1,894,260

2,163,209.4 65,275.6 (23,110) 2,205,375

2,494,727.7 58,748.0 (25,883) 2,527,593

2,874,060.5 52,873.2 (28,989) 2,897,945

1,994,728 (221,510) 221,636 2,216,365 (221,510) (239,895) (259,806) (281,370) (304,724) (330,016) (357,407) (239,895) (259,806) (281,370) (304,724) (330,016) (357,407) -

(235,000) (948,500) (181,250) (505,000) (25,000) (87,115) (1,981,865) 234,500

382,385

522,879

678,765

855,197

1,059,491

1,282,531

1,536,853

2,205,375

2,527,593

2,897,945

Cash at the Beginning of the Period Cash at the End of the Period

234,500

234,500 616,885

616,885 1,139,764

1,139,764 1,818,528

1,818,528 2,673,725

2,673,725 3,733,216

3,733,216 5,015,747

5,015,747 6,552,600

6,552,600 8,757,976

8,757,976 11,285,568

11,285,568 14,183,513

17 September 2013

Pre-Feasibility Study

Fast Food Restaurant

14.3 Annexure 3 Balance Sheet


FAST FOOD RESTAURANT

Projected Balance Sheet (Rs.) Assets Current Assets Cash & Bank Balance Raw Material Inventory Prepaid Rent and GSD Total Current Assets Fixed Assets Fast Food Machinery Shop Office Fixtures Total Fixed Assets Preliminary Expenses Total Assets Owner's Equity Long Term Liability Total Equity & Liabilities

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

234,500 87,115 505,000 826,615

616,885 97,568 505,000 1,219,453

1,139,764 109,277 505,000 1,754,040

1,818,528 122,390 505,000 2,445,918

2,673,725 137,076 505,000 3,315,802

3,733,216 153,526 505,000 4,391,742

5,015,747 171,949 505,000 5,692,696

6,552,600 192,583 505,000 7,250,183

8,757,976 215,692 505,000 9,478,668

11,285,568 241,576 505,000 12,032,144

14,183,513 270,565 505,000 14,959,077

948,500 235,000 181,250 1,364,750 25,000 2,216,365 221,636 1,994,728 2,216,365

853,650 211,500 163,125 1,228,275 20,000 2,467,728 694,510 1,773,218 2,467,728

768,285 190,350 146,813 1,105,448 15,000 2,874,488 1,341,165 1,533,323 2,874,488

691,457 171,315 132,131 994,903 10,000 3,450,821 2,177,304 1,273,517 3,450,821

622,311 154,184 118,918 895,412 5,000 4,216,214 3,224,068 992,146 4,216,214

560,080 138,765 107,026 805,871 5,197,613 4,510,190 687,423 5,197,613

504,072 124,889 96,324 725,284 6,417,980 6,060,573 357,407 6,417,980

453,665 112,400 86,691 652,756 7,902,939 7,902,939 7,902,939

408,298 101,160 78,022 587,480 10,066,148 10,066,148 10,066,148

367,468 91,044 70,220 528,732 12,560,876 12,560,876 12,560,876

330,722 81,939 63,198 475,859 15,434,936 15,434,936 15,434,936

18 September 2013

Pre-Feasibility Study

Fast Food Restaurant

14.4 Useful Project Management Tips Technology List of Machinery & Equipment

Description Freezers (12 cf.) Broast Machine (15 Pound Capacity)* Deep Well Fryer (Single Valve With 2 Baskets) Hot Plate for Burgers, Kebab, Sandwiches (30"x22") Bin Marry Soup Container (2 Valve With Steel Cabinet) Potato Cutter (8mm) Peeler (4.5 Kg Potato Peeling Capacity) Microwave Generator 1.5 kva Keg rack and others

Quantity 2 1 1 1 1 1 1 1 1 2

Required spare parts & consumables: Suppliers credit agreements and availability as per schedule of maintenance be ensured before start of operations. Energy Requirement: The energy requirements should be properly assessed and alternate source of energy for critical operations must be arranged in advance. Machinery Suppliers: Suppliers should be asked for training and after sales services through a proper contract. Quality Assurance Equipment & Standards: Products quality standards must be defined and a system to check them instituted; this improves credibility.

Marketing Product Development & Packaging: Expert's help may be engaged for product/service and packaging design & development Ads & P.O.S. Promotion: Business promotion and dissemination through banners and launch events is recommended. Product broachers should be developed from quality service providers.
19 September 2013

Pre-Feasibility Study

Fast Food Restaurant

Sales & Distribution Network: agreements are required.

Expert's

advise

and

distribution

Price - Bulk Discounts, Cost plus Introductory Discounts: Price should never be allowed to compromise quality. Price during introductory phase may be lower and used as a promotional tool. Product cost estimates should be carefully documented before price setting.

Human Resources List of Human Resource

Description Owner Manager Kitchen Supervisor Cook Servers Dishwasher Cleaner Total Staff

No. of Employees 1 1 3 3 1 1 10

Adequacy & Competencies: Skilled and experienced staff should be considered an investment even to the extent of offering share in business profit. Performance Based Remuneration: Attempt to manage human resource cost should be focused through performance measurement and performance based compensation. Training & Skill Development: Encouraging training and skill of self & employees through experts and exposure of best practices is route to success. Least cost options for Training and Skill Development (T&SD) may be linked with compensation benefits and awards. 14.5 Useful Links Prime Ministers Office www.pmo.gov.pk Small & Medium Enterprises Development Authority (SMEDA) www.smeda.org.pk

20 September 2013

Pre-Feasibility Study

Fast Food Restaurant

National Bank of Pakistan (NBP) www.nbp.com.pk First Women Bank Limited (FWBL) www.fwbl.com.pk

Government of Pakistan www.pakistan.gov.pk Ministry of Industries & Production www.moip.gov.pk Ministry of Education, Training & Standards in Higher Education http://moptt.gov.pk Government of Punjab www.punjab.gov.pk Government of Sindh www.sindh.gov.pk Government of Khyber Pakhtoonkhwa www.khyberpakhtunkhwa.gov.pk Government of Balochistan www.balochistan.gov.pk Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk Government of Azad Jammu & Kashmir www.ajk.gov.pk Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk Security Commission of Pakistan (SECP) www.secp.gov.pk Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
21 September 2013

Pre-Feasibility Study

Fast Food Restaurant

www.fpcci.com.pk State Bank of Pakistan (SBP) www.sbp.org.pk National Bank of Pakistan (SBP) www.nbp.com.pk First Women Bank Limited (FWBL) www.fwbl.com.pk Pakistan Institute of Fashion Design (PIFD) www.pifd.edu.pk Pakistan Fashion Design Council (PFDC) www.pfdc.org

15. KEY ASSUMPTIONS


Particulars
Sales Increase Increase in Cost of Raw Materials Increase in Staff Salaries Increase in Utilities (Electricity / Water / Gas) Increase in Rent Increase in Office Expenses Debt / Equity Ratio Depreciation o o o Plant Building Machinery & Equipment Office Furniture & Equipment 10 % per annum (Diminishing Balance) 10 % per annum (Diminishing Balance) 10 % per annum (Diminishing Balance) 2.5% of Written Down Value 05 days 7 Years Monthly 08 % per annum Tax rates for non-salaried individuals

Assumption
12 % per year 12 % per year 10 % per year 10 % per year 10 % per year 10 % per year 90 : 10

Machine Annual Maintenance Cost Raw Material Inventory Loan Period Loan Installments Financial Charges (Loan Rate) Tax Rate

22 September 2013